This article is the first in a series to educate and support individuals and their families who have come into substantial wealth and wish to pursue a strategy of preservation and growth in the family and its wealth.
New to managing wealth?
Most private wealth is built over time, but we are starting to see more frequently new wealth owners and the next generation of families with substantial financial assets through liquidity events and inheritance.
The intention of these articles is to discuss the challenges you may face when new to managing wealth and help you think about your own situation and avoid some of biggest causes of families losing their wealth or even worse, falling apart.
Take control and don’t rush into investing
The most common mistake made when someone comes into money, is to invest it without really knowing what they want to achieve.
When a wealthy individual or their family sit down with an adviser to discuss their personal wealth, the focus is typically on the money. However, too often the wealth owner seeks out an adviser to help them develop an investment strategy when they are not clear on what they want or need from their assets and end up following what the adviser recommends.
The classic approach to wealth management tends to be investment centric and agenda led by the adviser. The most likely result is investment objectives or risk parameters will shape the family’s approach to managing wealth, without the opportunity to properly assess various options (such as real estate and unlisted investments) and decide what approach is right for you.
So where to start then?
Capital preservation and investment returns are important, but so is understanding your goals and purpose in designing a strategy which is best for you.
I would encourage you to take the time to first think about what you want the wealth to do and be clear on your needs and goals before discussing the deployment of capital. You then will be better placed to discuss and create with your adviser a more co-ordinated wealth and investment strategy that connects your personal, family and financial goals to your financial objectives.
Each individual and family has its own values and unique circumstances relating to managing wealth. To help you discover what your family stands for and wants for the future, ask yourself the following questions:
- What’s important to you?
- What’s important to your family?
- What do you want from your wealth?
- Where do you think you need help with?
The more important questions to address at the outset are those that go beyond the numbers and will help you be purposeful and strategic in how you will use your time and financial resources.
No matter the size of the family's net worth, financial security still has the same meaning, have you enough money for your present and future needs. However, there is a difference when the wealth is more significant. For these families, it not just about how much money you accumulate but what you do with it. These families can move beyond an objective of wealth creation and preservation alone and look beyond its economic value and decide a clear purpose for their wealth – a sense that wealth matters because of what they can do with it.
Getting organised and keeping on track
A crucial component for financial success, is to create a strategic wealth management framework that enables you and your advisers to understand pathway options to go forward; guide decision making; make sure action is taken; and regularly review objectives are being achieved.
Strategic planning is the process of creating a vision for your future and putting together a framework to bring it to reality. We believe sound planning principles will both ensure you have enough money to do all the things you want to do during your lifetime and to properly plan the succession of your wealth, whether it's made to future generations or philanthropic causes.
Invest in your family’s future
Managing the financial capital is important but helping the family prepare and manage itself is just as important if the family wishes to lead more productive and fulfilling lives and sustain the capital across generations.
Most advisers bring to families an expertise in investment or finance, but few tend to focus on the family itself. One of the main reasons why wealthy people choose to establish a family office or manage their own wealth and not engage with a traditional wealth manager or financial institution is so they can shift the focus from the financial assets to a more family centric approach to managing the wealth.
On your side, guiding the way
At Sayers Wealth our philosophy is not only to help navigate complex and changing circumstances but support a family with its own effective stewardship of its finances and investment capital.
Of course, each individual and each family’s wealth journey will be different but in future articles we will cover the following financial and family issues we think are important when managing and investing personal wealth.
- Should you create a family office
- Designing your investment strategy
- Planning a successful transfer of wealth
By Jason Chequer, Partner & Head of Advice, Sayers Wealth